The German Coal Commission - Agora Energiewende...The German Coal Commission 3 Dear reader, Coal has...

The German Coal Commission A Roadmap for a Just Transition from Coal to Renewables

ANALYSIS

The German Coal Commission

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ANALYSIS


A Roadmap for a Just Transition from Coal to Renewables

STUDY BY

Agora Energiewende Anna-Louisa-Karsch-Straße 2 | 10178 BerlinT +49 (0)30 700 14 35-000F +49 (0)30 700 14 [email protected]

Philipp Litz*, Dr. Patrick Graichen, Frank Peter

* Transparency Note: The author worked as a advisor to the co-chair of the commission Prof. Dr. Barbara Praetorius between June 2018 and January 2019.

MODELING

Aurora Energy ResearchDresdener Straße 15 | 10999 Berlinwww.auroraer.com

Hanns König, Lars Jerrentrup, Raffaele Sgarlato, Dr. Manuel Köhler

Cover picture: dpa

Version: 1.0158/03-A-2019/EN

Please cite as: Agora Energiewende und Aurora Energy Research (2019): The German Coal Commission. A Roadmap for a Just Transition from Coal to Renewables.

www.agora-energiewende.de

This publication is available for download under this QR code.

ACKNOWLEDGEMENTS

This study was supported in part by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH under the German Energy Transition Expertise for China Project, funded and commissioned by the German Federal Ministry for Economic Affairs and Energy (BMWi).

Agora Energiewende is a joint initiative of the Mercator Foundation and the European Climate Foundation. The cooperation of Agora Energiewende and Aurora Energy Research is kindly supported by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) on behalf of the German government.


3

Dear reader,

Coal has been a cornerstone of economic growth and

prosperity since the dawn of the industrial era.

However, climate change, air pollution, and increas-

ing health and environmental concerns require us to

end the age of coal as soon as possible. To be sure,

countries with heavily coal-dependent energy sys-

tems such as China and Germany will face serious

socio-economic challenges in the effort to reduce

and eventually phase out coal-fired energy produc-

tion.

To prevent economic disruption and associated so-

cial hardship for workers, coal-dependent countries

would be well-advised to initiate a political process

on how to transition from coal to clean energy. In the

summer of 2018, Germany launched such a process

by establishing a Commission on Growth, Structural

Change and Employment otherwise known as the

Coal Commission . Following in-depth deliberations

between key stakeholders, in January of 2019 the

Commission presented a comprehensive roadmap

for the phase out of coal-fired power generation in

Germany by 2038. The federal government has de-

clared its intention to implement the

recommendations.

In this report, we analyse the recom-

mendations with regard to their anticipated impact

on the German electricity sector, carbon emissions,

and economic development in coal-mining regions.

I hope you find this report both thought-provoking

and informative.

Markus Steigenberger

International Director, Agora Energiewende

Key findings at a glance:

The recommendations of the Coal Commission are an important milestone in the Ger-

man energy policy debate: Germany has now resolved to phase out both nuclear en-

ergy and coal, and is fully committed to developing renewable energy. For decades,

Germany s economy was reliant on energy from lignite and hard coal; in the future, renewa-

bles will serve as a basis for economic prosperity.

The Commission's proposals, if fully implemented, will lead to CO2 savings of some

one billion tonnes by 2038. In the absence of implementation, CO2 emissions from coal-

fired power plants will only decline at a slow rate. However, the Coal Compromise is not suffi-

cient for Germany to meet its 2030 carbon emissions target. Considerable additional

measures are required, especially in the industrial, building, and transport sectors.

The Coal Compromise will ensure a just transition for coal regions and employees. The

compromise guarantees that no worker will be left high and dry and that coal mining regions will have sufficient time and resources to adapt economically. To this end, the compromise foresees 2 billion euros in federal spending per year- which in parts can also be understood as compensation for structural policy failures since German reunification especially in Eastern Germany.

While the Coal Compromise envisions full phase-out occurring in 2038, earlier

achievement of this goal is likely. Periodic reviews in 2023, 2026, 2029, and 2032 will of-

fer policymakers an opportunity to react to a worsening climate crisis with additional

measures. a socially eq-

uitable acceleration of the phase-out.


4

Executive Summary

In June 2018, German federal government estab-

lished the Commission on Growth, Structural

Change and Employment , otherwise known as the

Coal Commission . The Commission was tasked

with developing a strategy for phasing out coal-fired

power generation that would allow Germany to meet

its climate mitigation targets. Furthermore, it was

asked to define policy measures that would create

economic opportunities for the affected coal-mining

regions. The Commission s final report was adopted

almost unanimously in January 2019 (voting ratio:

27:1) and submitted to the federal government in

February 2019. The government has announced it

will implement the recommendations in 2019 20.

In addition to conducting a comprehensive review of

the role of coal in Germany, its impact on the envi-

ronment, and its significance for the private sector,

the Commission s final report includes a five-ele-

ment strategy for phasing out coal (Figure S-1):

Element A Phase out coal step by step:

tions, the development of new coal-fired power

plants and opencast mines should be terminated.

Furthermore, existing coal-fired power plants

should be withdrawn successively from the mar-

ket by 2038 at the latest. In 2032, an assessment

should be conducted as to whether it is possible

to phase out coal by 2035. This schedule means

that the phase-out of coal-fired power genera-

tion will happen much faster than under a busi-

ness-as-usual scenario on the basis of existing

measures and expected market developments

(Figure S-2).

Element B Support the transformation of

traditional mining regions: With the help of in-

vestment in advanced energy systems, the ex-

pansion of transport and digital infrastructure,

Figure S-

Phase out coal

Safeguard emission mitigation

with more renewables, CHP and

cancelation of CO2-certificates

Ensure security of supply with

monitoring, reserves and new capacity

Make the power system more flexible with more grids and

storage

Maintain competitiveness of

industries and affordability for

households with power price compensations

Compensate utilities for early shut downs

for employees with active labour market

policies

Conduct dialogue with resettlement

affected near lignite mines

Modernise the power

system

Alleviate hardship for thoseconcerned

DA

Supporttransformationof traditional

mining regions

B

Create new jobs and value added by investment and

modernisation of infrastructure,research and innovation

Indemnify recultivation

of lignite mines

No more new coal-fired

power plants and mines

Shut down existing plants

step by step until 2035

or 2038 the latest

CMonitor

and adjust measures

E

Monitor and report progress

in 2023, 2026, 2029 and 2032

Take additional action

if needed


5

and the promotion of innovation (for example,

through the establishment of research institu-

tions), alternative employment and economic op-

portunities are to be created in today's coal-min-

ing regions. In addition, measures should be

taken to minimize the cost risks to impacted re-

gions associated with the decommissioning

open-pit mines.

Element C Modernise the power system: The

decline of electricity generation from coal-fired

power plants is to be replaced primarily through

renewables by increasing the share of renewable

electricity generation to 65 per cent of gross elec-

tricity consumption by 2030. The gradual re-

placement of coal-fired power plants with flexi-

ble CHP systems should be encouraged with

targeted legislation. Resulting surplus CO2 certif-

icates within the European Emission Trading

Scheme should be cancelled. In order to ensure

continued security of supply, existing reserve

instruments are to be used in the medium term. If

market mechanisms do not provide for the con-

struction of necessary capacity, the current de-

sign of the energy-only market should be re-

viewed and revised accordingly. The necessary

modernisation and expansion of the electricity

grid should also take place in good time.

Element D Alleviate hardship for those con-

cerned: In order to continue to ensure affordable

and competitive electricity prices, consumers

should be compensated for part of the increase in

electricity prices that is anticipated by the Com-

mission. Power plant operators are to be compen-

sated for the early closure of their assets. Those

directly employed in the coal industry are to be

supported by targeted labour market policies. In

addition, based on a dialogue with those affected,

it should be clarified in good time whether and

which village resettlement measures in lignite

Figure S-2: Recommended phase-out plan for coal-fired power plants compared to business as

usual

based on Commission for "Growth, Structural Change and Employment" (2019), Aurora Energy Research

1915

9

0

22

15

8

00

10

20

30

40

50

2018 2022 2030 2035 2038

GW

Phase-Out Plan of the Coal Commission

Phase 1: Entry Phase 2: Meet climate target 2030 Phase 3: Final Phase-OutCapacity in the

market

Instrument Hard Coal

31

20

38

17

0

30 Business as usual

Coal Compromise

Negotiations

Negotiations Negotiations to be defined

Tenders to be defined

Option: Phase-Out 2035

Instrument Lignite


6

mining areas should still be carried out in order to

provide a solid basis for future planning.

Element E - Monitor and adjust measures: Im-

plementation should be reviewed regularly in a

monitoring process that publishes its findings in

regular reports. An independent panel of experts

should review the measures and their implemen-

tation in 2023, 2026, and 2029 with a view to

climate targets, electricity prices, security of

supply, and employment and structural policy

objectives. If the event of a target shortfall, addi-

tional measures should be taken.

If the Commission s recommendations are imple-

mented, Germany will become the first country in

the world to phase out both nuclear energy and coal-

fired power generation and to replace this conven-

tional generation with renewables (Figure S-3). The

calculations conducted for this study indicate that it

is highly probable that the climate target for the en-

ergy sector can be achieved in 2030 if coal-fired

power plant capacity is reduced to 17 gigawatts by

2030 and renewable energy is raised to 65 per cent

of gross electricity consumption. By 2038, a total of

around one billion tonnes of CO2 emissions will be

avoided compared to the business-as-usual. How-

ever, to ensure achievement not only the energy in-

dustry target but also the entire German climate pro-

tection target for 2030 (that is, a 55 per cent

reduction in greenhouse gas emissions compared to

1990), considerable further measures are necessary

in the transport, building, industrial, and agricultural

sectors (Figure S-4).

The gradual phasing-out of coal-fired power gener-

ation in combination with the expansion of renewa-

ble energy to 65 percent of generation by 2030 also

means that wholesale electricity prices in 2030 will

Figure S-3: Gross electricity generation in 2010-2030 with implementation of the coal compromise

Data 2010-2018: AG Energiebilanzen (2019); Projection from 2019: own calculations based on Aurora Energy Research

105

189243

299

389141

92

66

146155

13398

52117

118 75

7041

8962

90

101132

634 648 639

598

643

0

100

200

300

400

500

600

700

2010 2015 2020 2025 2030

TW

h

Renewables Nuclear Lignite Hard coal Gas Others


7

be significantly lower compared to a scenario with-

out further measures (Figure S-5). This offers partic-

ular opportunities for energy-intensive industrial

companies, whose electricity consumption is almost

entirely exempt from green energy surcharges. For

non-privileged electricity consumers, electricity

prices would rise slightly compared to the reference

scenario. This is due in particular to an increase in

grid usage fees that arise from modernisation

measures. However, according to the Commission's

recommendations, this increase will be offset

through a reduction in grid charges. This measure

will help to keep electricity prices for non-privileged

consumers at their current level.

Various instruments will be in place to guarantee se-

curity of supply during the coal phase-out: the Fed-

eral Network Agency will have veto power on de-

commissioning in case doubts arise as to continued

security of supply; decommissioning will be per-

formed on a consensual basis with operators; the

Combined Heat and Power Act will remain in effect;

security of supply will be monitored on an ongoing

basis; and existing reserve instruments will remain

in place. The model calculations show, however, that

in the medium term it will be necessary to build sev-

eral gigawatts of new gas-fired power plant capac-

ity. Whether the energy-only market will provide

sufficient incentive for their construction will have

to be closely monitored by the German government

in the coming years and, if problems arise, appropri-

ate measures will need to be implemented in good

time.

The scale and long-term nature of the recommended

structural aid for the coal regions concerned and re-

lated investment in energy, infrastructure, and re-

search should enable the regions to enjoy sustainable

economic development. Extending the phase-out of

coal to 2038 at the latest will also enable the coal re-

gions to tap new opportunities for wealth creation

and employment. A comprehensive package of la-

bour policy measures will ensure that no employee

in the coal industry is left high and dry.

Figure S-4: Greenhouse gas emissions by sector, 1990 2018, targets and projection 2020 and 2030

Bundesministerium für Umwelt, Naturschutz und Reaktorsicherheit (2019), Umweltbundesamt (2019), own calculations *preliminary data

0

200

400

600

800

1.000

1.200

1.400

199

0

199

5

20

00

20

05

20

10

20

15

*20

18

2020

20

30

Mio

. t C

O2-

Äq

uiv

ale

nte

Energy sector Industry Buildings Transport Agriculture Other

Target 2020:

min. -40% Target 2030:

min. -55%

Projection 2030: -41.7%

Status Quo 2018:

-30,5%


incl. CoalCompromise

excl. CoalCompromise


8

The additional costs to the federal budget up until

2038 are still subject to considerable uncertainty. A

first estimate indicates that additional costs will run

between 69 and 93 billion euros. Up to 2038 this

corresponds to about 3.6 to 4.9 billion euros per year,

or 1.0 to 1.4 per cent of the annual federal budget

(which in 2018 was 348.3 billion euros). The bulk of

the costs are attributable to structural aid for the re-

gions (40 billion euros) and the proposed compensa-

tion mechanisms for electricity cost increases (16 to

32 billion euros). The compensation paid to power

plant operators amounts to between 5 and 10 billion

euros, while the compensation paid to employees for

labour market policy measures runs at between 5 to

7 billion euros. For the cancelling of CO2 certificates,

about 3 to 4 billion euros will need to be spent.

Figure S-5: Development of wholesale electricity prices, EEG surcharge, and grid fees for non-privi-

leged consumers, 2010 to 2018, 2023, and 2030

2010 2018: Aurora Energy Research, BNetzA (2019); Projection from 2019: Aurora Energy Research, calculations

4,9 5,5 4,5 3,9 3,3 3,2 2,9 3,4 4,5 4,8 4,7 5,6 5,1

2,3

4,04,0 5,7 6,6 6,4 6,5

6,96,7 6,4 6,7

3,7 4,2

6,5

6,56,7

7,1 6,9 6,8 6,97,3

7,1 7,9 7,9

9,2 9,413,8

16,015,1

16,7 16,9 16,4 16,317,6

18,319,1 19,3 18,5 18,7

0,0

5,0

10,0

15,0

20,0

25,0

2010 2015 2018*

ct/k

Wh

(re

al 2

017

)

Wholesale prices RES surcharge Grid costs

2023Coal

Compromise

2030Coal

Compromise

2023Reference

2030Reference


9

CONTENT

1 The German Energy Transition and the

discussion on coal ..................................................... 10

2 The role of coal in Germany's energy system

and economy ............................................................... 13

3 Mission, composition, and advisory process of

..................................... 21

4 The recommendations of the Commission on

........................................................................................... 24

5 Effects on the German power sector up to

2023 and 2030 ............................................................. 31

6 Cost burden to the federal budget .................. 44

7 Conditions for the success of the compromise

.......................................................................................... 46

8 Critique and discussion ........................................... 47

9 Conclusion .................................................................... 50

Literature.............................................................................. 52


10

1 The German Energy Transition and the discussion on coal

The transformation of the German energy system is

guided by a long-term strategy that seeks to change

existing energy system in four areas:

Reduction of greenhouse gas emissions: In ac-

cordance with the Climate Action Plan 2050,1

which was adopted by the German Federal Gov-

ernment in 2016, Germany is pursuing the goal of

near greenhouse gas neutrality by 2050. On the

road to this goal, greenhouse gas emissions are to

be reduced by 40 per cent by 2020 and by 55 per

cent by 2030 compared to 1990 levels. There are

also separate objectives to reach by 2030 for in-

dividual sectors (namely, the energy industry,

buildings, industry, transport, and agriculture).

Nuclear phase-out: By the end of 2022, Ger-

many will have completely phased out the use of

nuclear energy. This goal is anchored in the nu-

clear phase-out law of 2011.2 Expansion of renewable energy: By 2050, at

least 60 per cent of gross final energy consump-

tion should come from renewable sources. In the

electricity sector, the share of renewable energy

is to be increased to 65 per cent by 2030 in ac-

cordance with the current coalition agreement.3

By 2050, it is to be raised to at least 80 per cent,

in line with the 2010 Energy Concept.4

Increasing energy efficiency: By 2050, primary

energy consumption is to be reduced by 50 per

cent compared to 2008. Electricity consumption

is to be reduced by 25 per cent by 2050 relative to

2008.5

In addition, the measures necessary for achieving

the above goals are to be based on the guidelines of

the energy policy triangle emphasizes the

need to consider environmental compatibility, af-

fordability, and security of supply.

1 (Bundesregierung, 2016) 2 (Deutscher Bundestag, 2011) 3 (CDU/CSU/SPD, 2017)

The German government has already implemented a

number of measures to ensure that this transfor-

mation of energy systems is successful. These in-

clude, for example, the promotion of renewable en-

ergy and combined heat and power generation, as

well as the obligatory participation of most CO2-

emitting German power plants and industrial facili-

ties in the European Emissions Trading System (EU

ETS). Additional measures include the promotion of

electromobility, energy research funding, the pro-

motion of more efficient heating systems, and regu-

latory efficiency standards for the construction of

new buildings.6

Thanks to these measures, the energy transition has

made good progress in recent years. By the end of

2018, greenhouse gas emissions were 30.5 per cent

lower relative to 1990 (Figure 1):

Energy industry: Greenhouse gas emissions

from the energy industry have fallen by around

34 per cent since 1990. This reduction is primar-

ily attributable to the age-related decommission-

ing of old coal-fired power plants, the transfer of

some lignite-fired power plants into a reserve in

2016, the expansion of renewable energy in the

electricity sector and the increased use of com-

bined heat and power generation.

Industry: Industry has so far seen a 31 per cent

decline in emissions. This reduction is mostly at-

tributable to the closure of industrial plants in

eastern Germany following reunification, the

greater avoidance of process emissions through

improved process technology and efficiency

measures, and the greater use of natural gas CHP

instead of coal to generate electricity and heat.

Buildings: Emissions in the buildings sector have

so far fallen by 43 per cent. The main drivers here

have been in particular the conversion of old coal

stoves and oil-fired heating systems to modern

natural gas plants and the expanded use of dis-

trict heating. Building efficiency standards for

new buildings and the energy-efficient

4 (Bundesregierung, 2011) 5 (Bundesregierung, 2011) 6 (Bundesministerium für Wirtschaft und Energie, 2018)


11

refurbishment of part of the existing building

stock have also contributed to reducing emis-

sions to date.

Transport: Greenhouse gas emissions in the

transport sector have only been reduced by 1 per

cent in relation to 1990. Lack of progress in this

sector is due on the one hand to a significant in-

crease in road-based freight traffic and, on the

other hand, to an insufficient reduction in vehicle

fleet consumption.

Agriculture: Greenhouse gas emissions from ag-

riculture have fallen by 23 per cent since 1990.

Despite the successes achieved in many areas, the

Federal Government's current projection report

shows that Germany is likely to miss its target of a

40 per cent emissions reduction below 1990 levels

by 2020. On the basis of the measures decided so far,

it can be assumed that only a reduction of around 32

7 (Bundesministerium für Umwelt, Naturschutz und Reaktorsicherheit,

2019)

per cent will be achieved by 2020. A similar picture

emerges with a view to achieving the 2030 climate

protection target: while the target calls for a 55% re-

duction, only a 41.7 per cent reduction can be ex-

pected based on currently implemented measures.7

One of the reasons for to

meet its climate protection targets is the high CO2

emissions released by coal combustion to generate

electricity and heat in the energy and industrial sec-

tors. In 2018, these coal emissions accounted for

around one third of total greenhouse gas emissions

in Germany.8 Therefore, German climate mitigation

targets cannot be achieved without a reduction and,

in the long term, an end to the use of coal.

The looming failure to meet the 2020 climate target

is not surprising; indeed, this failure has been re-

peatedly foreseen in the German government's

8 (Bundesministerium für Wirtschaft und Energie, 2019)

Figure 1: Greenhouse gas emissions by sector, 1990 2018, targets and projection 2020 and 2030

Bundesministerium für Umwelt, Naturschutz und Reaktorsicherheit (2019), Umweltbundesamt (2019) *preliminary data

0

200

400

600

800

1.000

1.200

1.400

199

0

199

5

200

0

200

5

2010

2015

*20

18

2020

2030

Mio

. t C

O2-Ä

qu

iva

len

te


Target 2020:


min. -55%



Status Quo 2018

-30.5%


12

biennial projection reports. Since the beginning of

the 2010s, environmental associations, civic interest

groups, and climate scientists have therefore been

calling for additional coal reduction measures in the

short term as well as the long-term phasing out of

coal-fired power generation. In this connection, a

variety of measures have been proposed, including

the forced decommissioning of power plants, addi-

tional national or regional CO2 pricing mechanisms,

CO2 emission limits, and annual emission budgets for

coal-fired power plants.9

At the same time, however, numerous arguments

against additional policy measures to restrict coal

use or the long-term phase-out of coal energy have

been voiced in the public debate. One main argument

is that additional climate protection measures at the

national level are counterproductive or unnecessary

in sectors already regulated by the European emis-

sions trading system. Meanwhile, others have ar-

gued that measures to phase out coal could endanger

energy affordability and security of supply. Yet a

third reason for opposition is the negative economic

effects that would result in coal-producing regions,

including loss of jobs.

In order to respond to the anticipated failure to meet

climate protection targets, in 2014 the German gov-

ernment adopted the "Climate Protection 2020 Ac-

tion Programme", which defined additional climate

protection measures for all sectors in order to reduce

the climate protection gap up to 2020.10 Since the

measures proposed in this connection by the Federal

Ministry of Economics and Energy incited intense

opposition by power plant operators and trade un-

ions, the so-called capacity mechanism was cre-

ated as an alternative instrument. Formally, this is a

capacity reserve that will retain 2.7 gigawatts of old

lignite-fired power plants, for which operators are

remunerated generously. The measure should result

in 11 to 12.5 million tonnes of additional CO2 abate-

ment in 2020.11

9 A comprehensive overview of the instrument options discussed can

be found in (DIW Berlin/Wuppertal Institut/Ecologic Institut, 2018) 10 (Bundesregierung, 2014)

However, this was not the end of the political debate

on the future role of coal-fired power generation. On

the one hand, the measures adopted were far from

sufficient for ensuring compliance with the 2020

and 2030 climate protection targets. On the other

hand, in December 2015 the international commu-

nity signed the Paris Climate Protection Agreement,

which represented an increase in the current level of

ambition in global climate protection.12

As part of the Climate Action Plan 2050, the long-

term climate protection strategy adopted in 2016, the

Federal Government declared it would form a Com-

mission for Growth, Structural Change and Regional

Development.13 This formation of this commission

aimed to alleviate the intensifying social conflict

over the future role of coal in the German energy

system.

In March 2017, the current governing coalition (con-

sisting of the CDU, CSU, and SPD) confirmed that

such a commission would be established in their co-

alition agreement. It stated that the commission

would involve stakeholders from the realms of poli-

tics, business and the environment, as well as repre-

sentatives from impacted trade unions and regions,

in order to draw up an action programme by the end

of 2018 on the basis of the Climate Action Pro-

gramme 2020 and the Climate Action Plan 2050.

11 (Deutscher Bundestag, 2016) 12 (United Nations, 2015) 13 (Bundesregierung, 2016)


13

2 The role of coal in Germany's energy system and economy

Primary energy consumption

German energy system has

been gradually declining since 1990. This can be ex-

plained in particular by the following factors:

Falling energy demand: Since 1990, overall pri-

mary energy demand has been gradually declin-

ing. This is due, on the one hand, to direct effi-

ciency and modernisation measures, and, on the

other hand, to the increased use of energy

sources and technologies with lower conversion

losses.

Increased use of natural gas: Over time, the use of

natural gas has increased, particularly in build-

ings. In addition, natural gas also is also increas-

ingly used in power plants, replacing coal-fired

generation.

Expansion of renewable energy: The Renewable

Energy Sources Act of 2000 has made a large

contribution to the expansion of renewable en-

ergy, especially in the electricity sector. In recent

years, this has increasingly led to the displace-

ment of coal-fired power plants in the electricity

sector.

In 2018, primary energy consumption in Germany

totalled around 12,963 PJ (Figure 1). The dominant

energy source is mineral oil, which has a share of

34.3 per cent. Gas follows in second place with 23.7

per cent. Coal currently covers about 21.3 per cent,

with lignite (11.3 per cent) and hard coal (10.0 per

cent) accounting for about half of the total. The share

of renewable energy is around 14.0 per cent, and nu-

clear energy accounts for 6.4 per cent.

Figure 1: Primärenergieverbrauch 1990 - 2018

AG Energiebilanzen (2019)

14.905 14.269 14.401 14.558 14.217

13.262 12.963

0

2.000

4.000

6.000

8.000

10.000

12.000

14.000

16.000

1990 1995 2000 2005 2010 2015 2018*

PJ

Braunkohle Steinkohle Mineralöle

Erdgas Kernenergie Erneuerbare Energien

Sonstige

Figure 2: Primary energy consumption, 1990 2018


0

2.000

4.000

6.000

8.000

10.000

12.000

14.000

16.000

1990 1995 2000 2005 2010 2015 2018*

PJ

Lignite Hard coal Oil Natural gas Nuclear Renewables Others


14

Resources, occurrence and use

While lignite is still mined almost entirely in the

three remaining domestic lignite regions in the

Rhineland, Lusatia and Central Germany, hard coal is

now imported in its entirety (Figure 2). The share of

domestic hard coal production in 2017 was still

around 18 per cent. But with the closure of the last

mines at the end of 2018, hard coal is no longer

mined in Germany. The majority of imports in 2017

came from Russia (38 per cent), the USA (18 per

cent), Colombia (13 per cent) and Australia (11 per

cent).14

Lignite is currently still mined in 8 large opencast

mines in three areas, with the open-cast mines in

each area operated by a single company: The open-

cast mines in the Rhine mining area (Hambach,

Garzweiler and Inden) are operated by RWE, while

those in Lusatia (Welzow, Nochten, Reichwalde) are

14 (Bundesministerium für Wirtschaft und Energie, 2019) 15 (Öko Instiut, 2017)

operated by LEAG. MIBRAG is responsible for the

opencast mines in the Central German mining area

(Vereinigtes Schleenhain, Profen). RWE and LEAG

also operate their own lignite-fired power plants,

most of which are in close proximity to opencast

mines, which together account for the majority of

the lignite-fired power plant capacity still installed.15

total lignite resources would be sufficient

to keep power generation from lignite-fired power

plants at today's level for many decades to come.

However, the quantities actually extractable from

mines that have already received legal approval are

considerably smaller and will last for 10 to 25 years,

depending on the mine and power plant network.16

Open-cast mine operators currently still envisage

the resettlement of a total of 13 villages, although

only a partially approved framework operating plan

16 (Öko Instiut, 2017)

Figure 3: Domestic production and import of lignite and hard coal in 2017

calculations based on Statistik der Kohlewirtschaft (2019) * including inventory changes

100%

0%

Lignite

Production Import*

8%

92%

Hard Coal

Production Import*


15

has been submitted so far. In almost all villages, re-

settlement is rejected by part of the local population,

while part of the population has already signed re-

settlement agreements with the open-cast mine op-

erators. As of 2018, a total of around 120,000 people

had been resettled in today's lignite mining areas of

the Rhineland, Lusatia and Central Germany.

The open-cast mine operator RWE is planning to

clear the Hambach forest at the Hambach opencast

mine. This led to major protests by the environmen-

tal movement in 2018.17

17 (Zeit Online, 2018)

The majority of lignite and hard coal is used to gen-

erate electricity and heat in power plants (Figure 3).

Lignite in particular is burned almost entirely in

power plants or as briquettes in heating stoves. On

the other hand, two thirds of hard coal is used to

generate electricity and heat, whilst the remaining

third is used in industry, particularly in steel and al-

uminium production.

Figure 4: Lignite and hard coal consumption in 2017

Statistik der Kohlewirtschaft (2019)

100%

0%

Lignite

Power and Heat Others

61%

39%

Hard Coal

Power and Heat Others


16

Installed generation capacity

At the end of 2018, Germany had a total installed

generation capacity of around 222.3 gigawatts (net).

Of this total, around 110.7 gigawatts were accounted

for by variable feed-in systems and 111.6 gigawatts

by controllable systems. This corresponds in each

case to about half of the installed generation capac-

ity.

The installed generation capacity of coal-fired

power plants at the end of 2018 was 44.7 gigawatts.

Of this total, 21.2 gigawatts were accounted for by

lignite power plants and 23.7 gigawatts by coal-fired

power plants. There are a total of 145 individual tur-

bines with a minimum size of 10 megawatts. In ad-

dition, 113 of the 145 plants are technically capable

of generating heat in cogeneration operation, in ad-

dition to electricity.

While the lignite-fired power plants are mainly con-

centrated in the lignite mining areas around the

open-cast mines, the hard coal-fired power plants

are more widely distributed throughout Germany.

Due to the lower transport costs for hard coal when

using waterways and the quantities of water re-

quired for cooling, these are typically found on larger

watercourses or near the coast. However, hard-coal-

fired power plants are particularly numerous in the

federal states of North Rhine-Westphalia and Ba-

den-Württemberg, not far from traditional mining

areas in the Saarland and the Ruhr.

As coal-fired plants are flexibly dispatchable, they

still make an important contribution to security of

supply. In particular, they provide reserve capacity,

ensure system stability thanks to large rotating

masses, and also provide control energy. Sufficient

alternatives in all of these areas need to be set in

place during a phase-out from coal.

Figure 5: Installed generation capacity at the end of 2018

calculations, see Agora Energiewende (2019) * including biogenic household waste

21,2

23,7

9,5

29,4

8,79,8

53,2

6,3

45,7

5,59,3

Lignite

Hard coal

Nuclear

Natural gas

Oil + other

Pumped Storage

Onshore wind

Offshore wind

Solar

Hydro

Biomass

222,3

regelbareLeistung:111,6 GW

variable capacity: 110,7 GW

dispatchable capacity111,6 GW


17

Electricity and heat generation

Total gross electricity generation in Germany in

2018 was 646.1 terawatt hours, while gross electric-

ity consumption was only 598.9 terawatt hours.

Thus, 51.2 terawatt hours were physically exported

to neighbouring countries. 225.7 terawatt hours of

electricity were generated from wind, solar and

other renewable energy sources (34.9 per cent),

while 420.4 terawatt hours were generated from

conventional energy sources (65.1 per cent).

A total of 228.7 terawatt hours still came from coal-

fired power plants in 2018. This corresponds to a

share of 35.4 per cent. Lignite accounted for 145.5

terawatt hours and hard coal for 83.2 terawatt hours.

It should be noted, however, that around 8 per cent of

the electricity generated by coal-fired power plants

is not fed into the electricity grid, but is used to

18 own calculations based on (AG Energiebilanzen, 2018)

operate the power plant machinery (conveyor belts,

coal mills). The actual net electricity generation of

the coal-fired power plants is correspondingly lower

(2018: 210.4 terawatt hours).

Heat generation from coal-fired power plants with

cogeneration amounted to a total of 46.5 terawatt

hours in 2017. Of this amount, 33.5 terawatt hours

were attributable to district heating and 12.9

terawatt hours to industrial process steam and heat.

This corresponds to a total share of about 3.6 per cent

of the final heat consumption.18

Figure 6: Gross electricity generation in 2018


Lignite; 22,5%

Hard coal; 12,9%

Nuclear; 11,8%

Natural gas; 12,9%

Oil + others; 5,0%

Onshore wind; 14,3%

Offshore wind; 3,0%

Solar; 7,2%

Biomass*; 8,0%

Hydro; 2,6%

Renewables; 34,9%

Gross electricty generation (TWh)

216 226

437 420

654 646

2017 2018

Conventionals

Renewables


18

CO2 emissions and environmental impacts

The combustion of coal generates considerable

amounts of CO2. Depending on the efficiency of the

power plants and the quality of the coal burned,

emissions run at around 0.9 1.1 grams per kilowatt

hour (electric) for lignite and 0.7 0.9 grams per kilo-

watt hour (electric) for hard coal.19 For coal-fired

power plants with simultaneous heat generation (co-

generation), the specific emissions from electricity

generation are correspondingly lower, as the respec-

tive emissions contribute to both electricity and heat

generation.

Although CO2 emissions from lignite and hard coal

have declined in recent years, about one third of

Germany's CO2 emissions still originate from elec-

tricity and heat generation in coal-fired power

19 Own calculations

plants (2018: 31.6 per cent). In 2018, this corre-

sponded to 273 million tons of CO2 (Figure 6).

In addition, the combustion of coal is also associated

with considerable environmental pollution, includ-

ing the release of air pollutants such as mercury, sul-

phur dioxide, nitrogen oxides, and fine particulates.

Air pollutants are usually produced locally and are

associated with increased rates of respiratory and

cardiovascular disease. Furthermore, open-cast

mining operations cause negative environmental

impacts due to the necessary lowering of the

groundwater level and, in some cases, increased iron

inputs into local water resources. 20

20 (DIW Berlin/Wuppertal Institut/Ecologic Institut, 2018)

Figure 7: Greenhouse gas emissions, 1990 2018

BMWi (2019); estimate for 2018 based on AG Energiebilanzen (2019) * combustion-related CO2 emissions

750

563

1.250

1.1211.043

992942

907866

0

200

400

600

800

1.000

1.200

1.400

1990 1995 2000 2005 2010 2015 2020 2030

Mio

. t C

O2

e

Lignite* Hard Coal* Oil* Gas* Others* Climate target

2018*


19

Employment and gross value added

At the end of 2018, a total of around 32,800 people

were still directly employed in the lignite and hard

coal sector in Germany. This corresponds to 0.1 per

cent of employees subject to social insurance contri-

butions (2018: 32.8 million).21

The number of direct employees in the lignite in-

dustry totalled around 20,850. Of these, 15,600

were employed in open-cast mining operations

and around 5,200 in lignite-fired power plants.

The number of employees in hard coal mining to-

talled around 13,030, of which around 4,120 were

still employed in hard coal mining. The remaining

7,830 employees worked in the power plants.22

21 (Statistisches Bundesamt, 2019a) 22 No figures are available in the official statistics for employees in the

hard coal-fired power plants. They are therefore estimated on

the basis of installed capacity (23.7 GW) and an employment fac-

tor of 0.3 BS/MW (enervis, 2016). 23 For the calculation of the employment effects of the coal industry,

numerous studies with different methodologies are available

(see in detail (DIW Berlin/Wuppertal Institut/Ecologic Institut,

Along the value chain of these sectors, the employ-

ment of around two additional people is either indi-

rectly stimulated or induced.23 As of the end of 2018,

around 86,000 people were still employed directly or

indirectly in the coal sector or their employment was

induced by the coal sector. This corresponds to 0.26

per cent of the employees subject to social insurance

contributions in Germany (2018: 32.8 million).24

In the lignite mining areas, however, the share of

employment among employees subject to social in-

surance contributions is significantly higher at 0.9

per cent (direct) and 1.4 per cent (direct, indirect and

induced) due to the regional focus of the industry. In

addition, the annual salaries in this sector are above

2018); (Öko Instiut, 2017); (Kommission "Wachstum,

Strukturwandel und Beschäftigung", 2019). For reasons of com-

plexity reduction, the Commission therefore agreed that the cal-

culation formula described above should be used as a guideline.

Indirect and induced employment in coal mining is not taken into

account, as it was discontinued at the end of 2018. 24 (Statistisches Bundesamt, 2019a)

Figure 8: Employees in the lignite and hard coal sector at the end of 2018

Coal industry statistics (2019); own calculations based on enervis (2017)

15.650

5.200

4.120

7.830

19.770

13.030

0

5.000

10.000

15.000

20.000

25.000

30.000

Mining Plants

Dir

ect

em

plo

ye

es

Lignite Hard Coal

Total: 32.800


20

average and are characterised by a comparatively

high level of unionisation. The average age of direct

employees is 45 years.25

The gross value added of electricity generation in the

lignite and hard coal industry is strongly dependent

on the development of wholesale power prices, fuel

commodity prices, and CO2 certificates. In 2018, the

gross value added of coal-fired power plants was an

estimated 5.9 billion euros.26 Of this amount, lignite-

fired power plants accounted for around 4.2 billion

euros and coal-fired power plants for around 1.7 bil-

lion euros.

The total direct gross value added of 5.9 billion euros

corresponds to about 0.2 per cent of total gross value

added in Germany (2018: 3,055 billion euros).27 In the

lignite mining areas, however, this is similar to the

figure for employment 0.5 to 2.1 per cent higher

than the national average. 28

25 (RWI Leibnitz-Institut für Wirtschaftsforschung, 2018b) 26 calculations; possible revenues from heat generation or

the provision of system services were not taken into account as

no data are publicly available for this purpose. However, these

only account for a fraction of the total revenues of the power

plants and were therefore neglected for this estimation. The

value chain of the mining industry is included. 27 (Statistisches Bundesamt, 2019b) 28 calculations based on (RWI - Leibnitz-Institut für

Wirtschaftsforschung, 2018a)


21

3 Mission, composition, and advisory process of the Commission on Growth, Structural Change and Em-

ployment

In June 2018, the Federal Government set up the

Commission on Growth, Structural Change and Em-

ployment . The Commission consists of a total of 31

members and is headed jointly by Ronald Pofalla,

former head of the Federal Chancellery, Dr. Barbara

Praetorius, an energy and environmental economist,

and the former minister presidents Matthias

Platzeck and Stanislav Tillich. The members of the

Commission work on an honorary basis.

The Commission also includes representatives from

the energy sector, lignite mining regions, industry,

environmental associations, trade unions, the scien-

tific community, and the coalition parties (Figure 8).

29

(2019): Abschlussbericht.

The plenary sessions were also attended by rep-

resentatives from German states, eight federal

ministries, and the Federal Chancellery.29 The

Commission's work was supported in terms of

content and organisation by an office attached to

the Federal Ministry of Economics and Energy.

The chairmen of the Commission also reported

regularly to the State Secretaries Committee set

up for this purpose, which included representa-

tives from the eight federal ministries concerned

(Figure 9).

According to the Federal Government's decision of 6

June 2018 to establish the Commission, the Commis-

sion has the following mandate:30

"Creation of concrete opportunities for new, fu-

ture-proof jobs in the affected regions in cooper-

ation between the federal government, states, lo-

cal authorities and economic actors (e.g. in the

30 (Bundesregierung, 2018)

Figure 9: Composition of the Commission on Growth, Structural Change, and Employment

(2019) * without voting rights

regions (7)

business and industry (5)

science (5)energy industry (4)

environmental associations (3)

trade unions (3)

parliament (3)*

administration (1)

31 members


22

field of transport infrastructure, the development

of skilled workers, entrepreneurial development,

the establishment of research facilities, long-

term structural development).

Development of a mix of instruments that brings

together economic development, structural

change, social compatibility, social cohesion and

climate protection and at the same time estab-

lishes opportunities for sustainable energy re-

gions in the context of the energy system trans-

formation.

This also includes necessary investment in the

regions and economic sectors affected by struc-

tural change, for which existing federal and EU

funding instruments should be used effectively,

purposefully, and as a matter of priority in the

affected regions. In this connection, a fund for

structural change, consisting primarily of federal

funds, should also be used.

Measures that reliably meet the 2030 target for

the energy sector, including a comprehensive

impact assessment. The Climate Change Plan sets

the target of reducing emissions from the energy

sector by 61 to 62 per cent in 2030 compared to

1990 levels. For the contribution of coal to elec-

tricity generation, the Commission will propose

appropriate measures to achieve the 2030 sec-

toral objective of the energy sector, to be included

in the 2030 programme of measures for imple-

menting the Climate Change Plan.

In addition, to develop a plan for the gradual re-

duction and phasing out of coal-fired power gen-

eration, including a completion date and the nec-

essary associated legal, economic, social,

renaturalisation and structural measures.

Also, to define measures for the energy industry

to reduce as much as possible the gap to reach the

40% reduction target. To this end, the Federal

Government will publish a current estimate of the

size of the gap to be expected in the context of the

Climate Protection Report 2017".

Figure 10: The Commission's organisational structure and timetable

based

Juni DecemberNovemberOctoberSeptemberAugustJuli

Commission on

4 Chairs + 24 members with voting rights + 3 without voting rights Board of State

SecretariesSecretary

supported supported

Interim report with a focus on regional policies

January

Final reportinkl. regional,

labour market, energy and

climate measures

Mandateby the

government

2018 2019

27:1


23

The Commission has held a total of ten plenary

meetings. The initial consultations up to autumn

2018 solicited expert input on the topics of struc-

tural change, climate protection, security of supply,

competitiveness, and affordability. The second set of

meetings involved concrete negotiations for the

preparation of the final report and its recommenda-

tions. The plenary sessions were prepared in the two

established working groups Structural Development

and Employment and Energy and Climate .

The final report was finally adopted almost unani-

mously by the members of the Commission in Janu-

ary 2019 (voting ratio: 27:1) and handed over to the

Federal Government in February 2019 by the Chair-

person of the Commission.


24

4 The recommendations of the Com-mission on Growth, Structural Change, and Employment

Overview of the recommendations

In addition to a comprehensive review of the role

played by coal in Germany, the Commission's final

report includes concrete recommendations on how

to phase out coal-fired power generation (Figure 10).

To this end, the Commission has submitted a con-

crete timetable for the phasing-out of coal-fired

power stations in Germany (element A). The Com-

mission also recommends the implementation of

supplementary measures in order to take advantage

of latent opportunities as well as mitigate negative

effects. On the one hand, the current coal regions are

to be supported in their transformation through ac-

tive regional policy (Element B), and, on the other

hand, the electricity and energy system is to be

comprehensively modernised (Element C). Further-

more, possible economic hardships for those directly

affected by the coal exit are to be cushioned (Element

D). Finally, the phase-out and its effects are to be

regularly monitored and, if necessary, readjusted

(Element E).

Element A: Phase out coal

The Commission recommends that, if possible, no

new coal-fired power plants should be connected to

the grid; furthermore, no new opencast lignite mines

should be developed (Figure 11). The Commission's

recommendations provide for a gradual reduction of

existing coal-fired power plant capacities in the

electricity market. Accordingly, the capacity availa-

ble on the market from coal-fired power plants is to

be reduced to a maximum of 30 GW by 2022 (in-

cluding 15 GW of lignite and 15 GW of hard coal) and

to a maximum of 17 GW by 2030 (including 9 GW of

Figure 11: Overview of the recommendations of the Commission on Growth, Structural Change, and

Employment

based

Phase out coal

Safeguard emission mitigation

with more renewables, CHP and

cancelation of CO2-certificates

Ensure security of supply with

monitoring, reserves and new capacity

Make the power system more flexible with more grids and

storage

Maintain competitiveness of

industries and affordability for

households with power price compensations

Compensate utilities for early shut downs

for employees with active labour market

policies

Conduct dialogue with resettlement

affected near lignite mines

Modernise the power

system

Alleviate hardship for thoseconcerned

DA

Supporttransformationof traditional

mining regions

B

Create new jobs and value added by investment and

modernisation of infrastructure,research and innovation

Indemnify recultivation

of lignite mines

No more new coal-fired

power plants and mines

Shut down existing plants

step by step until 2035

or 2038 the latest

CMonitor

and adjust measures

E

Monitor and report progress

in 2023, 2026, 2029 and 2032

Take additional action

if needed


25

lignite and 8 GW of hard coal) (Figure 11). In addition,

an emissions-reduction contribution of 10 million

tonnes of CO2 is to be made by lignite-fired power

plants by 2025. All market exits are subject to ap-

proval by the Federal Network Agency in accordance

with Section 13b of the Energy Industry Act. The lat-

ter may refuse a planned decommissioning if it con-

siders that this would jeopardise system stability.

With regard to developments in the interim years up

to 2038, the Commission recommends that the

phase-out path be designed such that overall emis-

sions reductions are as steady as possible. With this

recommendation, this Commission hopes to avoid

dislocation in the energy sector and in regional

economies. The last coal-fired power plant should be

phased out by 2038 at the latest. In 2032 it will be

examined whether a complete phase-out of coal is

already possible by 2035. The concrete design of the

exit timetable should be such that the Hambach

forest at the Hambach open-cast mine can be pre-

served in its present size.

In order to ensure sufficient legal certainty, the

Commission recommends that, as an instrument,

consensual negotiation agreements, including com-

pensation payments, should be concluded with oper-

ators by 2022. These are then to be fixed by law. For

the period from 2023 to 2030, the Commission rec-

ommends a competitive bidding process to deter-

mine which hard-coal-fired power stations will be

decommissioned and the level of compensation to be

received. By contrast, the phase-out for lignite-fired

power plants will continue to be based on negotiated

solutions. If no amicable agreement can be reached

between the federal government and the operators

by 30 June 2020, the federal government should

adopt a mandatory decommissioning schedule, in-

cluding appropriate compensation for power plant

operators.

Figure 12: The recommendations of the Commission Growth, Structural Change, and Employ-

ment to phase out coal

based

Phase out coal step by stepA

•Gradual reduction of existing coal-fired power plant capacities in the market:

• to a maximum of 15 GW of lignite and 15 GW of hard coal in 2022

• to a maximum of 9 GW of lignite and 8 GW of hard coal in 2030

•phase out by 2038 at the latest; In 2032 it will be examined whether a complete phase-out of coal is already possible by 2035

Shut down existing coal-fired power plants step by step

•No permitting for new coal plants and preferably no connecting to the grid of power plants still being built

•No permitting of new mines for energetic use and preferably preservation of Hambach forest near Hambach mine

No more new coal-fired power plants and mines


26

Element B: Support the transformation of tradi-

tional mining regions

In the Commission's view, supplementary structural

and energy policy measures in the coal regions are

necessary to support the transformation of tradi-

tional mining regions. The declared aim of these

measures is to replace the gradual loss of value added

and employment with new value added and employ-

ment, especially in the industry sector.

To this end, the Commission recommends the mod-

ernisation of

mining regions, including the expansion of renewa-

bles, as well as the replacement of old generation as-

sets with alternative generation and storage tech-

nologies. The Commission additionally recommends

the acceleration of planning processes, investment in

transport and digital infrastructure as well as in local

research in order to enhance regional

competitiveness as a location for business and facil-

itate innovation. In this connection, the regions are

to be developed into model regions for regulatory

purposes in which new industrial processes and

systems can be tested and further developed. In the

short and medium term, federal government offices

with a total of 5,000 employees are to be located in

the coal regions by 2028 at the latest. These

measures are to be financed by an additional 40 bil-

lion euros over the next 20 years for the coal regions.

A further building block is to indemnify the opera-

tion of opencast lignite mines with insurance mod-

els. This intends to protect regional governments in

coal mining regions from the potential bankruptcy of

an open-cast mine operator, which would lead to

significant public spending for renaturation (Figure

13).

Figure 13: recommended phase-out path for coal-fired power plants compared

to capacity change in a business-as-usual scenario

based

1915

9

0

22

15

8

00

10

20

30

40

50

2018 2022 2030 2035 2038

GW

Phase-Out Plan of the Coal Commission

Phase 1: Entry Phase 2: Meet climate target 2030 Phase 3: Final Phase-OutCapacity in the

market

Instrument Hard Coal

31

20

38

17

0

30 Business as usual

Coal Compromise

Negotiations

Negotiations Negotiations to be defined

Tenders to be defined

Option: Phase-Out 2035

Instrument Lignite


27

Element C: Modernise the power system

Another recommendation contained in the Commis-

sion's final report is the comprehensive modernisa-

tion of the electricity and energy system. In this re-

gard, the Commission notes that the emissions

mitigation effect of phasing out coal should be safe-

guarded by expanding renewable energy to 65% of

gross electricity consumption by 2030. To ensure

this goal is met, the Renewable Energy Sources Act

should be amended accordingly. As part of this

amendment, the support mechanism for combined

heat and power should be continued (see below). To

ensure that the phasing out of coal-fired power gen-

eration also has an effect within the framework of

European emissions trading and does not lead to a

waterbed effect over the long term in other coun-

tries, the federal government should also cancel the

necessary quantity of CO2 certificates. Appropriate

CO2 pricing in sectors outside emissions trading

should also be examined, the Commission advises.

Under the modernization of energy systems, the

Commission also foresees the expansion of measures

to monitor security of supply. If there are short-term

supply bottlenecks, the existing system of reserves is

to be used, the Commission advises. However, if the

market does not show signs of sufficient investment

in new plants in the medium term, the introduction

of a capacity market should be examined. In order to

ensure a sufficient supply of heat energy, the Com-

bined Heat and Power Act is to be continued until

2030 and, among other things, the replacement of

coal-fired power plants with CHP facilities is to be

promoted. At the same time, however, the govern-

ment support system is to be further developed in

the direction of flexible CHP systems.

The Commission also addresses the need to make

electricity and energy systems more flexible as part

of the expansion of wind and solar power. This in-

cludes, on the one hand, the modernisation and bet-

ter use of the electricity grids through grid expan-

sion, improved market mechanisms, and the

Figure 14: The recommendations of the Commission on Growth, Structural Change, and Employ-

ment to support the transformation of traditional mining regions

based

Support the transformation of traditional mining regionsB

•Adaption of permits to changes in lignite demand

• Usage of the possibility of security payments when approving permit changes

•Usage of compensation payments for power plant operators for recultivation

Indemnify recultivation of opencast lignite mines

•Modernisation of energy infrastructure in including the expansion of renewables, grids, storage and PtX

• Speeding up formal planning processes •

• Investment in transport and digital infrastructure as well as R&D

• Locating federal government offices and employees

Creating new employment and value added


28

optimisation of existing capacity. This also includes

the promotion of storage facilities especially in

coal-mining regions in the form of pilot projects.

Furthermore, the Commission calls for the review of

the existing tax and levy system in the energy sec-

tor, as it is increasingly proving to be an obstacle to

the further integration of energy sectors. In this

connection, the Commission recommends examin-

ing appropriate CO2 pricing in sectors outside emis-

sions trading (Figure 14).

Element D: Alleviate hardship for those con-

cerned

With a view to the phase-out of coal-fired power

generation, the Commission takes into account that

the proposed measures will have a direct negative

impact on individual groups. In order to mitigate or

if possible avert these effects, the Commission

proposes a package of support and compensation

measures. Against this backdrop, the Commission

acknowledges the need to ensure that the phase-out

is as socially acceptable as possible. In concrete

terms, the Commission recommends extensive la-

bour market measures to benefit those currently

employed in the coal industry, including protections

against dismissal, provisions for retraining, and

measures for reallocation to new jobs. In the case of

employees aged 58 and up, adjustment funds are to

be used to enable early retirement without financial

losses.

Furthermore, the Commissions calls on state govern-

ments to engage in dialog with residents in open-

cast mining regions and to adjust the open-cast

mining plans as promptly as possible in accordance

with the Commission's recommendations. In this re-

gard, the aim is to ensure that those still affected by

possible resettlement have a reliable basis for plan-

ning.

Figure 15: The recommendations of the Commission to modernise the energy system

Modernise the power systemC

• Expansion of measures to monitor security of supply

•Usage of existing reserve mechanism and replacement of decommissioned coal capacities from the reserve

• Continuation and modernisation of CHP support

• Examination of capacity mechanism in 2023 if needed

Ensure security of supply

• Expansions of renewables to 65% of gross electricity consumption by 2030

• Cancelation of CO2

certificates• Examination of appropriate CO2 pricing in sectors outside emissions trading

Safeguard emission mitigation of phase out

Make the power system more flexible

•Modernisation and better use of grids through optimisation, expansion and market measures

•Promotion of storage systems

•Review of the existing tax and levy system in the energy sector


29

At the same time, the Commission acknowledges the

need to maintain the competitiveness of energy-in-

tensive industry, and calls on the federal government

continue and further develop CO2 electricity price

compensation at the European level. Similarly, com-

mercial, industrial, and household electricity con-

sumers are to be protected against a possible in-

crease in retail prices by lowering transmission grid

charges. The Commission expects a total of two bil-

lion euros a year in relief to be needed from 2023

onward. In addition, the costs of phasing out coal-

fired power generation are not to be passed on to

electricity consumers (Figure 15).

Furthermore, the phasing out of coal-fired power

generation should, if possible, take place in agree-

ment with power plant operators. This also means

that power plant operators will be compensated for

the early shut-down of capacities. The amount of

compensation granted is to be determined as part of

a negotiative process or as the result of competitive

bidding.

Element E: Monitor and adjust measures

In order to ensure successful implementation in all

areas, the implementation of the measures is to be

regularly reviewed by close monitoring in accord-

ance with specific criteria and recorded in progress

reports in the years 2023, 2026, and 2029. In addi-

tion, the progress reports are to be presented by the

federal cabinet and the Parliament. Furthermore, an

independent panel of experts will be entrusted with

the evaluation of the implementation. If the imple-

mentation of the measures reveals any shortcom-

ings, the federal government is to make consistent

adjustments (Figure 16).

Figure 16: The recommendations of the Commission to alleviate hardship for those concerned

based

Alleviate hardship for those concernedD

• Continue and further develop CO2 electricity price compensation at the European level

•Power price compensation for commercial and industry

Maintain competitiveness of commercial and industry

•Protections against dismissal,enabling early retirement without financial losses, provisions for retraining, and measures for reallocation to new jobs for coal workers

•Power price compensation for households

• Engagement in dialog of regional governments with residents near mines

Ensure socially acceptable implementation

Phase out in agreement with power plant operators

• Financial compensation for power plant operators for the early shut-down of capacities in a negotiativeand/or competitive bidding process


30

Figure 17: The recommendations of the Commission to monitor and adjust measures

based

Monitor and adjust measuresE

• Consistent adjustment if the implementation of the measures has shortcomings

Take additional action if needed

• Close monitoring in accordance with specific criteria and recorded in progress reports in the years 2023, 2026, and 2029

• Establishment of an independent panel of experts to assess progress

•Presentation in and resolution of the reports in and by the federal cabinet and the Parliament

Regularly review the measures and report progress


31

5 Effects on the German power sector up to 2023 and 2030

Agora Energiewende commissioned Aurora Energy

Research to model the impact of the Commission's

recommendations on the power sector up to 2023

and 2030.31 The model calculations rely on the com-

parison of two scenarios (Figure 17):

The reference scenario describes the develop-

ment in the electricity market in business-as-

usual terms, i.e. on the basis of measures already

implemented. Under this scenario, renewable en-

ergy is expanded in line with the capacity

amounts in the Renewable Energy Act 2017. With

regard to coal-fired power plants, no additional

market exits triggered by regulatory intervention

31 The Commission's recommendations set as the first target a reduc-

tion in coal capacities by 2022. However, a focus in placed on

2023 in order to take full account of the effects of the phase-out

are assumed. Accordingly, continued operation or

decommissioning is determined by their eco-

nomic viability.

The coal compromise scenario describes the de-

velopment of the electricity market if the

measures proposed by the Commission are im-

plemented. This scenario thus includes both an

increase in the expansion of renewable energies

to 65 per cent by 2030 and the gradual phase-out

of coal under the roadmap proposed by the Com-

mission.

Both scenarios assume nuclear energy will be phased

out in 2022. In order to account for the elimination

of heat extraction from coal-fired CHP plants due to

the exit from coal, it is assumed for these model

of nuclear energy by the end of 2022 and the associated effects

on the energy industry.

Figure 18: Coal-fired power plant capacity and the share of renewable energy in gross electricity

consumption in 2018, 2023, and 2030

Aurora Energy Research


32

calculations that gas-fired CHP plants serve as a re-

placement.32

The development of remaining power plant capaci-

ties, including their operational behavior, was calcu-

lated endogenously in the model. Accordingly, gas-

fired peaking capacities are increased or reduced in

line with their economic viability.

The two scenarios are modelled using a European

electricity market model that takes into account not

only developments in Germany but also expected

market developments in the broader European envi-

ronment. In accordance with the Commission's rec-

ommendations, the electricity market model follows

the logic of an energy-only market 2.0 . This means

that no additional capacity market was assumed for

Germany. Due to the permitted peak prices, the ex-

pansion of gas capacities in the model, for example,

is financed exclusively via the electricity market.

With regard to the expansion of interconnectors, the

model assumes realisation of the capacities planned

by Entso-e in its Ten Year Network Development

Plan. However, the projects that are far from being

realised were assigned lower weights.

The grid situation within Germany was not depicted,

as this is purely an exercise in market modelling and,

furthermore, it was assumed that the necessary grid

expansion would be fully implemented in 2030 in

accordance with the Commission's recommenda-

tions.

In addition, the following assumptions were made,

which were not varied between the scenarios:

CO2 prices: The price of CO2 certificates in Euro-

pean emissions trading rises from around 16

32 This is a simplifying assumption. Although the Commission's recom-

mendations provide for a continuation of the Combined Heat and

Power Act, they explicitly advocate further development towards

a more flexible cogeneration heat and power system. This also

includes the use of renewable energy. 33 For example, the development of fuel prices or the development of

foreign power plants may be different from that shown here.

This would have a substantial impact on the model results.

euros per tonne in 2018 to 32 euros per tonne in

2030.

Fuel prices: The price of hard coal falls from EUR

11 per megawatt hour in 2018 to around EUR 9

per megawatt hour in 2030, while natural gas

rises from EUR 17 per megawatt hour to around

EUR 27 per megawatt hour in the same period.

Gross electricity demand: Despite some pro-

gress in efficiency, electricity consumption rises

from 599 terawatt hours in 2018 to 619 terawatt

hours in 2030 as a result of energy sector inte-

gration.

Lifetime of power plants: In the case of hard

coal-fired power plants, the models assume a

technical lifetime of 40 or 45 years for CHP

plants and 50 years for lignite-fired power

plants, including the possibility of life-extending

retrofit measures given the economic viability of

continued operation.

Weather year: All scenarios were calculated on

the basis of the weather year 2013.

European power plant fleet: The development of

the foreign power plant park was based on En-

tso-e's Ten Year Network Development Plan and

supplemented by country-specific assumptions

based on the respective national energy strate-

gies and current market developments.

The assumptions made represent a plausible frame-

work for the future development of the electricity

markets from today's point of view, but in reality,

they will most likely turn out differently. The calcu-

lations presented here are therefore not forecasts,

but scenarios that serve to better understand and

evaluate the energy effects of the coal compromise

compared to a reference development separately

from other external factors.33

However, the qualitative trends between the scenarios described

here would be maintained, as the changes would have to be

taken into account in both scenarios. Agora Energiewende has

examined in detail the changes that occur in generation be-

tween Germany and France, for example, with divergent nuclear

power plant capacity developments in France, in the study "Die

Energiewende und die französischen Transition énergétique bis

2030 .


33

Development of generation capacities

in the electricity market

In the reference scenario, market capacity will in-

crease in the absence of further measures from 204

gigawatts in 2018 to 219 gigawatts in 2023 and 242

gigawatts in 2030, respectively (Figure 18). The ma-

jority of the increase in capacity is attributable to

renewable energy, in particular wind and photovol-

taics. The capacity of nuclear power will be reduced

to zero by the end of 2022 in line with the decisions

to phase out nuclear power, while the capacity of lig-

nite and hard coal-fired power plants will be reduced

to a total of 38 gigawatts by 2023 and 31 gigawatts

by 2030 in line with the market framework and age-

related shutdowns. The generation output of gas-

based plants rises from 24 gigawatts today to around

28 gigawatts.

34 (Bundesnetzagentur, 2019)

In the coal compromise scenario, total power plant

capacity available on the market will rise to 232 gi-

gawatts by 2023 and to 286 gigawatts by 2030 (Fig-

ure 18). These capacity levels are significantly higher

than in the reference scenario. The main reason for

this significant increase in capacity is the expansion

of renewable energy to 65 per cent in 2030. In line

with the Commission's recommendations, the in-

stalled capacity of coal-fired power plants will fall to

a total of 30 gigawatts by 2023 and to a total of 17 gi-

gawatts by 2030. By 2030, this will increase addi-

tional natural gas capacity needs from 12 gigawatts

to 36 gigawatts. Compared to the current installed

capacity of around 29 gigawatts, including moth-

balled plants and reserve power plants, this corre-

sponds to a net increase of around 7 gigawatts.34 A

prerequisite for this increase, however, is the mod-

ernisation of the transmission grid, which will

Figure 19: Generation capacities (net) in 2018, 2023, and 2030


10 10 10 10 108 8 7 5 5

50 61 68 6887

58 10 15

2142

6269 75

99

19

1815

12

9

22

2015

19

8

24

2127

28

36

204219

232242

286

0

50

100

150

200

250

300

2018 Reference2023

CoalCompromise

2023

Reference2030

CoalCompromise

2030

GW

Hydro

Biomass

Onshore

Offshore

PV

Nuclear

Lignite

Hard Coal

Gas

Oil

Others


34

enable the use of power plants previously held in the

grid reserve.

Development of electricity generation

In the reference scenario, net electricity generation

decreases from 619 terawatt hours in 2018 to 589

terawatt hours in 2023 (Figure 12). The phase-out of

nuclear power leads to a particularly strong drop in

terawatt hours; however, this is partially offset by

the expansion of renewable energy and, in particu-

lar, higher generation from coal-fired power plants.

By 2030, net electricity generation reaches 610

terawatt hours. This expansion is attributable to the

further expansion of renewable energy to 305

terawatt hours and the increased use of natural gas.

Net electricity generation from gas-fired power

plants will increase by around 30 terawatt hours

from 81 terawatt hours in 2018 to 111 terawatt hours

in 2030. The main reason for the increased use of

natural gas is, in particular, the anticipated age-

related decommissioning of coal-fired power plants

and the higher competitiveness of natural gas given

rising CO2 prices.

In the coal compromise scenario, net electricity gen-

eration falls to 589 terawatt hours by 2023, as in the

reference scenario (Figure 12). Given the expansion

of renewable energy and a reduction in coal-fired

generation, electricity generation from coal-fired

power plants is significantly lower in the coal com-

promise scenario, while generation from renewable

energy plants and natural gas is correspondingly

higher. By 2030, domestic electricity production will

rise to 630 terawatt hours, higher than today's level.

Accordingly, lignite and hard coal-fired power

plants produce only 86 terawatt hours of electricity

per year, which corresponds to a decrease of 126

terawatt hours compared to 2018. By contrast, elec-

tricity generation on the basis of renewable energy

totals around 388 terawatt hours, with the majority

being generated by wind and solar power. Power

Figure 20: Electricity generation (net) in 2018, 2023, and 2030


17 21 21 21 2042 35 35 25 25

94 109 121 128165

19 21 2161

86

4658

64

70

92

73

135

126 10481

48

77

10175

8538

8176

97

111 128

619577 568

610630

0

100

200

300

400

500

600

700

2018 Reference2023

CoalCompromise

2023

Reference2030

CoalCompromise

2030

TW

h

Hydro

Biomass

Onshore

Offshore

PV

Nuclear

Braunkohle

Hard Coal

Gas

Oil

Others


35

generation from gas-fired power plants will increase

to 128 terawatt hours by 2030.

This means that the coal-fired generation that is

eliminated as part of the coal compromise will be

mainly replaced by renewable energy. This becomes

particularly clear in a direct comparison of the sce-

narios in 2030 (Figure 20): While coal-fired power

generation declines by 80 terawatt hours, generation

from renewables increases by 83 terawatt hours.

Electricity generation from natural gas, on the other

hand, will increase by only 17 terawatt hours. How-

ever, this is also reflected in the long-term view of

gross electricity generation from 2010 onwards,

which foresees renewable energy replacing both the

discontinued generation of electricity from nuclear

power plants and the reduced generation of coal-

fired electricity by 2030, if the compromise is im-

plemented (Figure 21).

Figure 21: Difference in net electricity generation between the reference and coal compromise sce-

narios in 2030


83

-80

17 1 18

-100

-50

0

50

100

Renew-ables

Coal Gas Others Exports

Twh


36

Figure 22: Gross electricity generation in 2010 2030 given implementation of the coal compromise

Data from 2010-2018: AG Energiebilanzen (2019); Projection from 2019: calculations based on Aurora Energy Research

105

189243

299

389141

92

66

146155

13398

52117

118 75

7041

8962

90

101132

634 648 639

598

643

0

100

200

300

400

500

600

700

2010 2015 2020 2025 2030

TW

h

Renewables Nuclear Lignite Hard coal Gas Others


37

Development of electricity trading

In the reference scenario, the export surpluses de-

cline from their current level of 50 terawatt hours to

only 5 terawatt hours in 2023, thus producing an al-

most even balance of trade (Figure 22). The phasing

out of nuclear energy is the core driver of this de-

clining surplus. Looking ahead to 2030, the electric-

ity export surplus of 6 terawatt hours will remain

roughly at a comparable level, as the loss of electric-

ity generation from coal-fired power plants will

gradually be offset by more renewable energy and

gas-fired power plants.

In the coal compromise scenario, the balance of trade

is also roughly even in 2023 at 5 terawatt hours (Fig-

ure 22). This is attributable to the replacement of

electricity generated by coal-fired power plants

with renewable energy and domestic natural gas. By

2030, the export surplus will rise to 25 terawatt

hours, particularly due to the high share of

renewables. Even if trade flows change only slightly

or if exports increase over the year as a whole, trade

flows fluctuate strongly by season. Exports, for ex-

ample, tend to increase in the spring and autumn,

given high electricity generation from wind and

photovoltaics at the same time. In the winter months,

on the other hand, there are more hours with higher

import shares. In model terms, this is the cost-effi-

cient result of a single European internal energy

market. If additional domestic generation capacities

in the form of reserves are deemed necessary to as-

sure security of supply during an emergency, this

would have no influence on the model results for

generation. However, this would lead to an addi-

tional financial burden, which was not considered by

this study.

The model results indicate that the phasing out of

coal-fired power generation in conjunction with an

increase in renewable energy will not lead to an in-

crease in the capacity utilisation of nuclear power

Figure 23: Balance of trade for electrical power from 2010 to 2018, 2023, and 2030


18

6

23

34 36

52 54 5550

5 5 6

25

0

10

20

30

40

50

60

2010 2015 2018 Reference2023

CoalCompromise

2023

Reference2030

CoalCompromise

2030

TWh


38

plants in France. The same applies to coal-fired

power plants in Poland and the Czech Republic:

While the lignite-fired power plants in these coun-

tries are already running at almost full capacity even

in the reference scenario, the coal compromise does

not lead to any additional production of hard coal

over the year as a whole. In fact, in 2030 conven-

tional production will even be displaced abroad (Fig-

ure 23).

Figure 24: Difference in net electricity generation between the reference and coal compromise

scenarios in Germany and abroad in 2030


135

81

48

77

85

3817

-7

-13

83

212

166

99

-20

82

0

50

100

150

200

250

2018 Reference2030

Changesin Germany

Chengesin other

countries

CoalComrpomise

2030

TW

h

Lignite Hard Coal Gas Renewables Conventionals


39

Development of greenhouse gas emissions

In the reference scenario, CO2 emissions from the

electricity sector will fall from around 319 million

tonnes in 2018 to only 314 million tonnes in 2023

(Figure 24). The reason for this is a significant in-

crease in generation from hard coal, as the phase-out

of nuclear energy leads to additional reliance on

these power plants. CO2 emissions will fall to 257

million tonnes by 2030. This decline is largely the

result of the expansion of renewables (in the scope

already foreseen by the Renewable Energy Sources

Act of 2017), and a rising price for CO2 certificates

(which leads in particular to the age-related decom-

missioning of coal-fired power plants). The target

corridor for CO2 reductions in the electricity sector of

180 to 186 million tonnes (which are derived for

2030 from the sector targets of energy and industrial

sectors) will thus be missed by at least 71 million

tonnes.

In the coal compromise scenario, on the other hand,

CO2 emissions will fall to 272 million tonnes by 2023

despite the phase-out of nuclear energy, and are

thus significantly lower than in the reference sce-

nario (Figure 24). This is because the supplementary

measures for renewables and coal will prevent a sig-

nificant rebound in hard coal emissions. By 2030,

CO2 emissions in the sector will have fallen to 182

million tonnes. The target corridor for the electricity

sector will thus be reached. In total, some 350 million

tonnes of CO2 emissions will be avoided between

2018 and 2030. By 2038, total CO2 emissions will

amount to some one billion tonnes. Total greenhouse

gas emissions drop by estimated 47.6 percent by

2030 compared to 1990 levels (Figure 25).

Figure 25: CO2 emissions of the power sector in 2018, 2023, and 2030


158 140113

8948

7786

6371

30

33 37

4549

56

49 49

4946

46

319 314

272257

182

0

50

100

150

200

250

300

350

400

2018 Reference2023

CoalCompromise

2023

Reference2030

CoalCompromise

2030

Mio

. t C

O2

Lignite

Hard Coal

Gas

Oil

Others

Target 2030


40

Figure 26: Greenhouse gas emissions by sector, 1990 2018, targets and projection 2020 and 2030

Bundesministerium für Umwelt, Naturschutz und Reaktorsicherheit (2019), Umweltbundesamt (2019), own calculations *preliminary data

0

200

400

600

800

1.000

1.200

1.400

199

0

199

5

20

00

20

05

20

10

20

15

*20

18

2020

20

30

Mio

. t C

O2-

Äq

uiv

ale

nte


Target 2020:


min. -55%


Status Quo 2018:

-30,5%


incl. CoalCompromise

excl. CoalCompromise


41

Development of electricity prices

Wholesale prices

In the reference scenario, the exchange electricity

price will rise from around 45 euros per megawatt

hour today to around 48 euros per megawatt hour in

2023, which is three euros per megawatt hour higher

than today (Figure 26). By 2030, wholesale electric-

ity prices will continue to rise to 56 euros per mega-

watt hour on the back of rising fuel and CO2 prices.

In the coal compromise scenario, the wholesale elec-

tricity price will also rise up to 2023 to 47 euros per

megawatt hour, a level comparable to that of the ref-

erence scenario. A similar picture emerges with a

view to 2030, when the wholesale electricity price in

the coal compromise scenario is only 51 euros per

megawatt hour, and thus around 5 euros per mega-

watt hour lower than in the reference scenario. This

is because the electricity generated by coal-fired

power plants, which is no longer needed, is predomi-

nantly replaced by renewable energy with low mar-

ginal costs. The 4 euro per megawatt hour price-in-

crease associated with lower coal generation is more

than offset by additional renewables generation,

which depresses prices by10 euros per megawatt

hour (Figure 27).

Renewables levy

The renewables levy for non-privileged consumers

in 2018 was 6.7 cents per kilowatt hour. In the refer-

ence scenario, the levy initially falls slightly to 6.4

cents per kilowatt hour despite the further expan-

sion of renewable energy. The levy then drops to

around 3.7 cents per kilowatt hour by 2030 (Figure

28).

Figure 27: Wholesale electricity prices from 2010 to 2018, 2023, and 2030


4955

4539

33 3229

34

4548 47

5651

0

10

20

30

40

50

60

2010 2015 2018 Reference2023

CoalCompromise

2023

Reference2030

CoalCompromise

2030

Euro

/Mw

h (

rea

l20

17)


42

Figure 28: Wholesale electricity prices from 2010 to 2018 and 2030


4955

4539

33 32 2934

45

5651

0

10

20

30

40

50

60

70

80

2010 2015 2018 Reference2030

CoalCompromise

2030

Eu

ro/

MW

h (

rea

l20

17)

Increase due to coal phase-out:

+ 4 Euro/MWh

Increase due to rising commodity prices:

+ 11 Euro/MWh

Decrease due to rising RES-share to 65%:

- 10 EUR/MWh

Figure 29: Development of exchange electricity prices, EEG levy, and grid fees for non-privileged

consumers, 2010 to 2018, 2023, and 2030

2010 2018: Aurora Energy Research, BNetzA (2019); Projection from 2019: Aurora Energy Research, calculations

4,9 5,5 4,5 3,9 3,3 3,2 2,9 3,4 4,5 4,8 4,7 5,6 5,1

2,3

4,04,0 5,7 6,6 6,4 6,5

6,96,7 6,4 6,7

3,7 4,2

6,5

6,56,7

7,1 6,9 6,8 6,97,3

7,1 7,9 7,9

9,2 9,413,8

16,015,1

16,7 16,9 16,4 16,317,6

18,319,1 19,3 18,5 18,7

0,0

5,0

10,0

15,0

20,0

25,0

2010 2015 2018*

ct/k

Wh

(re

al 2

017

)

Wholesale prices RES surcharge Grid costs

2023Coal

Compromise

2030Coal

Compromise

2023Reference

2030Reference


43

In the coal compromise scenario, the levy remains at

today's level of 6.7 cents per kilowatt hour until 2023

and is thus around 0.3 cents per kilowatt hour above

the expected reference development. Looking ahead

to 2030, this is about 4.2 cents per kilowatt hour and

thus 0.5 cents higher than in the reference scenario

(Figure 28).

The long-term reduction in both scenarios is ex-

plained in particular by the fact that old, cost-inten-

sive renewable energy plants from the early days of

the EEG law (that was adopted to support the devel-

opment of renewables) are no longer eligible for sup-

port and are replaced by much more cost-effective

new plants. In addition, the rising prices for electric-

ity on the wholesale market lead to a decline in the

remuneration granted to plant operators.

Grid charges

Grid charges for non-privileged consumers such as

households averaged 7.1 cents per kilowatt hour in

2018 (Figure 28). By 2030, an average increase in

grid fees of around 2.1 cents per kilowatt hour can be

expected in the reference development.35 In 2030

grid fees will thus be around 9.2 cents per kilowatt

hour.

With the expansion of renewables to 65 per cent by

2030, there is an additional need for grid moderni-

zation and expansion. The resulting increase in av-

erage grid tariffs for non-privileged consumers is

realistically estimated at around 0.2 cents per kilo-

watt hour.36

35 According to (Consentec/Fraunhofer, 2018), in the reference devel-

opment for household customers, an increase in network

charges of between 0.4 and 3.9 cents per kilowatt hour can be

expected by 2030. 36 The difference between the grid expansion in 2030, which will be

necessary for the 52% renewable (old EEG target) and the new

Sum of wholesale electricity price, renewables

levy and grid charges

For non-privileged consumers, the sum of the

wholesale electricity price, EEG surcharge and grid

fee thus rise in the reference scenario from 18.3

cents per kilowatt hour today to 19.1 cents per kilo-

watt hour by 2023. By 2030, the sum of these three

cost components will drop to around 18.5 cents per

kilowatt hour, slightly above their 2018 level. In the

coal compromise scenario, the sum of cost compo-

nents will rise to 19.3 cents per kilowatt hour by

2023, 0.2 cents more than in the reference scenario.

By 2030 the sum will drop again to 18.7 cents per

kilowatt hour. In all scenarios, grid charges are the

main cost driver, which underscores the need to re-

form existing regulatory inefficiencies.37

For privileged consumers such as the energy-in-

tensive industry, the coal compromise tends to have

predominantly positive effects. Large-scale con-

sumers will benefit in particular from falling whole-

sale electricity prices. However, the compromise

scenario assumes continued state aid to companies

for the costs related to emissions trading. Currently,

the relevant state aid approvals are only valid until

2020.

65% renewable target, is estimated by the transmission grid op-

erators in the 2nd draft of the NEP 2030 (2019) to be relatively

small. 37 (Agora Energiewende, 2019)


44

6 Cost burden to the federal budget

The measures recommended by the Commission on

Growth, Structural Change and Employment entail

additional financial burdens for the federal budget.

However, the total price tag of the compromise is still

subject to considerable uncertainty:

Some of the costs incurred will only be deter-

mined following negotiations between the federal

government and power plant operators, or, alter-

natively, following competitive bidding for de-

commissioning aid.

With regard to the adjustment allowances for

employees, for example, it is unclear how many

employees will take part in such a solution.

The European Emissions Trading Scheme Di-

rective, which contains the regulations for the

decommissioning of CO2 certificates, is impre-

cisely formulated, thus offering considerable lee-

way for alternative interpretations.

If the additional costs to the federal budget are to be

estimated despite existing uncertainties, the follow-

ing calculations appear reasonable (Figure 29):

Support for coal regions in transition: The

Commission has proposed 40 billion euros in as-

sistance. It should be kept in mind, however, that

a substantial share of this amount aims to com-

pensate for the decline in value added from coal-

fired power generation, and not to shore up

structural policy failures, especially since reuni-

fication in the East German lignite mining areas.

Nonetheless, the total sum will be paid out of the

federal budget.

Compensation payments and decommission-

ing premiums for power plant operators: If the

average cost of safety readiness for the compen-

sation of all lignite-fired power plants is esti-

mated at around 600 million euros per gigawatt

and the average cost of hard coal-fired power

Figure 30: Costs* to the federal budget for implementing the Commission's recommendations

calculations *The graph is based on the maximum values of the ranges

Regional policy40 Bln. Euros

Power price compensation

16 - 32 Bln. Euros

Utility compensations5 - 10 Bln. Euros

Labour market policies

5 - 7 Bln. Euros

CO2 certificates3 - 4 Bln. Euros

Total: 69 - 93

Bln. Euros


45

plants is estimated at around 200 million euros

per gigawatt, compensation costs of around 14

billion euros will result by 2038. On the basis of

European state aid law, however, it can be as-

sumed that compensation payments will only be

made available to a limited extent, over a limited

period of time, and are also degressive. In total,

the compensation paid to all power plants is thus

likely to be between 5 and 10 billion euros.

Transitioning support for employees: For em-

ployees of the coal industry aged 58 and up, the

goal is to enable early retirement without finan-

cial losses. This measure will cost 5 to 7 billion

euros.

Electricity price compensation: The Commis-

sion estimates that 2 billion euros annually will

need to be paid between 2023 and 2038 to com-

pensate firms for the costs of phasing out coal.

This yields a total compensation volume of 32

billion euros. In relation to the other calculations

presented here, this sum is comparatively high.

Since the additional increase in grid charges for

non-privileged consumers is estimated of 0.2

cents per kilowatt hour by 2030, an annual com-

pensation volume of 1 billion euros per year

seems appropriate. The compensation costs

would thus total 16 billion euros.

38 (Agora Energiewende/Öko Institut, 2018)

Cancellation of CO2 certificates: From today's

perspective, a cancellation of allowances seems

likely, especially in 2023 2030. This is because

existing surpluses will be cancelled by the market

stability reserve deletion mechanism in 2022,

and additional reductions after 2030 can be di-

rectly taken into account in the new trading pe-

riod.38 Assuming compensation is paid over five

years for the net savings in the electricity sector

resulting from the phasing out of coal, this will

result in additional costs of between 3 and 4 bil-

lion euros.

Thus, in total, the Coal Compromise will result in es-

timated additional costs for the federal budget of 69

to 93 billion euros up to until 2038. Up to 2038 this

corresponds to between 3.6 and 4.9 billion euros per

year, or 1.0 to 1.4 per cent of the annual federal

budget (2018: 348.3 billion euros).39

39 (Bundesministerium der Finanzen, 2019)


46

7 Conditions for the success of the compromise

Within six months, the Commission succeeded in

drawing up a detailed proposal for phasing out coal-

fired power generation. It was adopted almost unan-

imously at the end of January 2019. This consensus

was not easy to predict given the large number of di-

vergent interests represented on the Commission.

The following factors were critical to achieving this

agreement:

A political culture of consensus-oriented con-

flict resolution: Germany's political culture tra-

ditionally values consensual conflict resolution,

even on issues of fundamental disagreement.40

This culturewas also crucial in facilitating the

decisions to phase-out of nuclear energy41 and

gradually reduce subsidies for domestic coal

mining.42

The Commission was given a clear mandate,

but the federal government was otherwise not

directly involved: The federal government

granted the Commission a clear mandate with

transparent objectives. This enabled the formula-

tion of clear and goal-oriented recommendations.

Moreover, the ministries responsible were not

themselves part of the Commission, and partici-

pated in the plenary sessions only as listeners

with the right to speak, but without the right to

vote. Furthermore, the advisory committee and

administrative office provided sufficient oppor-

tunities for feedback. The fact that the federal

government and its representatives themselves

were not voting members ultimately abetted the

definition of a mutually acceptable package of

measures.

High willingness to reach agreement: The fore-

seeable failure to meet the 2020 climate protec-

tion target once again made it clear that a more

40 (Schmidt, 2018) 41 (Ethik-Kommission Sichere Energieversorgung , 2011)

long-term strategy for phasing out coal-fired

power generation is necessary to achieve the cli-

mate mitigation targets for 2030 and beyond. At

the same time, the operators of coal-fired power

plants have been under increasing economic

pressure for several years due to the progressive

expansion of renewable energy and rising CO2

prices, with attendant risks for the workforce.

Between 2013 and 2018, gross electricity gener-

ation from hard coal fell by 35 per cent. 43 As a re-

sult , all actors have played a constructive role in

finding solutions.

Long-standing attention for the issue: Discus-

sions surrounding the future role of coal in the

German energy system have become increasingly

intense in recent years. The phase-out of coal-

fired power generation was previously discussed

extensively as part of the stakeholder process

that informed the Climate Protection Plan 2050.

The positions advanced by various interests were

in many cases supported by comprehensive

studies (see Chapter 1). In this way, thanks to ex-

isting knowledge concerning possible policy in-

struments, their effects and necessary supple-

mentary measures, negotiations were conducted

on the basis of informed positions, and could be

concluded relatively quickly.

42 (Deutscher Bundestag, 2007); (Deutscher Bundestag, 2011) 43 (AG Energiebilanzen, 2019)


47

8 Critique and discussion Although the agreement reached within the Com-

mission was largely welcomed by the public at large,

the work of the Commission has also been criticised

in various quarters.44 A number of Commission

members submitted special opinions on individual

Commission recommendations.45 In particular, the

following points were criticised:

Insufficient representation of interests: The

composition of the Commission was one point of

criticism. For example, representatives from the

Fridays for Future movement and from human

rights organisations argued that the interests of

young persons, future generations and those di-

rectly affected by climate change were not suffi-

ciently represented on the Commission.46

While this complaint is not totally without merit,

the composition of the Commission appears bal-

anced overall. Furthermore, enlarging the Com-

mission would be likely to create problems, as the

31-head body is already at the limit of its work-

ing capacity.

Lack of implementation options: A further

point of criticism is that the Commission devel-

oped concrete recommendations for action in-

stead of a range of options while leaving the gov-

ernment to make a final decision on

implementation. Offering range of possible op-

tions would have preserved the decision-making

authority of elected officials.47

This point seems valid if one wishes to stress the

importance of democratic process. However, in

recent years, a great degree of discussion and de-

liberation has already taken place between

stakeholders on this issue. Between 2014 and

2018, for example, numerous studies on the coal

44 (Spiegel, 2019), (Süddeutsche Zeitung, 2019) 45 (Kommission "Wachstum, Strukturwandel und Beschäftigung", 2019) 46 (E3G, 2019), (Fridays for Future Deutschland, 2019), (Misereor, 2018) 47 (Kowarsch, 2019)

phase-out were published. This issue was also

discussed extensively during the stakeholder

process surrounding the Climate Protection Plan

2050 (see Chapter 1). In this way, deliberations on

this issue among policymakers were already at

an advanced stage. Accordingly, the Commission

merely had to develop a viable compromise given

positions that had been previously advanced as

part of a highly democratic process of debate.

Lack of compatibility with the Paris Agree-

ment: The participating environmental associa-

tions and climate scientists have argued that the

phase-out timetable does not represent a suffi-

cient contribution to reaching the objectives of

the Paris Agreement.48 This agreement, which

was ratified by the German parliament, seeks to

limit global warming to well below two degrees

Celsius. Environmental associations argue that

Germany must phase-out coal by 2030 to honour

its commitments under the Paris Agreement.

On the one hand, this criticism is justified, be-

cause the emission reduction commitments made

thus far by the international community will

limit the global rise in temperature to around

three degrees Celsius rather than to well below

two degrees Celsius. Thus, an increase in the cli-

mate protection ambitions of all nations in-

cluding Germany and other European countries

is necessary in order to avert a climate crisis.

However, the Commission's recommendations

explicitly refer to Germany's current climate tar-

gets for 2020, 2030, and 2050,49 rather than to

the more ambitious targets that would be needed.

Insufficient basis for reliable long-term plan-

ning

Critics have also argued that the recommenda-

tions fail to provide a sound basis for long-term

planning on the part of the impacted actors. On

48 (Kommission "Wachstum, Strukturwandel und Beschäftigung",

2019), (Spiegel, 2019), (Spiegel Online, 2019) 49 (Bundesregierung, 2018)


48

the one hand, the phase-out timetable only fore-

sees periodic milestone targets. This creates un-

certainty with a view to future coal-generation

capacity, the volume of available carbon emission

rights, and coal consumption levels. As a conse-

quence, the residents of villages slated for reset-

tlement lack clarity as to whether resettlement

measures will actually go forward. Furthermore,

critics argue that fuel or CO2 price fluctuations

could sabotage progress toward meeting climate

targets.50 As a response to this criticism, it was

been argued that the setting of fixed capacity

milestones in 2023, 2030, and 2050 would be too

far-reaching, as future market developments

e.g. with a view to fuel or CO2 prices are not yet

foreseeable. Furthermore, the lack of specific ca-

pacity targets means that faster CO2 reductions

are also a possibility.51

In this way, there are compelling arguments both

for and against interim capacity milestones. The

compromise proposed by the Commission seeks

to reconcile these opposing positions.

Carbon pricing would be more efficient: Some

stakeholders have argued that the phase-out

schedule proposed by the Commission will gen-

erate greater economic costs compared to alter-

native instruments, such as the setting of a price

floor for carbon emissions at the national or re-

gional levels.52

However, it is easy to see why the establishment

of a price floor only enjoyed minority support on

the Commission. A price floor would have meant

reduced compensation payments to power plant

operators. Furthermore, the adoption of a phase-

out schedule has the advantage of delivering clear

market signals, thus creating a more stable eco-

nomic environment for the entire energy indus-

try, especially with a view to the necessary in-

vestment in power plants, grid infrastructure,

50 (Pahle M./Edenhofer O. et al, 2019) 51 (Spiegel, 2019), (Frankfurter Allgemeine Zeitung, 2019b) 52 (Kommission "Wachstum, Strukturwandel und Beschäftigung", 2019)

and energy storage facilities. In the case of elec-

tricity consumers, a CO2 pricing instrument could

lead to significantly higher consumer prices, and

the effort to refund consumers for the additional

price burden would be associated with consider-

able uncertainties. A phase-out timetable is also

preferable from the perspective of employees, as

it makes it easier to plan shutdowns and enact

necessary labour market policies. Furthermore,

environmentalists prefer a phase-out timetable

because it makes emission-reduction obligations

more specific and binding.

Compensation payments for power plant op-

erators: Critics have also maligned the recom-

mended methods for determining which power

plants will be shut down. Specifically, the Com-

mission foresees (a) negotiating the terms of

shutdown directly with operators, and (b) holding

a competitive bidding process to determine the

level of compensation for decommissioning that

will be granted. Various legal experts have con-

cluded that the use of such methods to determine

how operators will be compensated is not neces-

sarily required by law.53 Accordingly, the use of

these methods will create budgetary burdens that

could have been avoided, it is argued.

However, this legal opinion is not uncontrover-

sial; other experts have come to the opposite con-

clusion.54 As Germany s Constitutional Court did

not have an opportunity to render a judgment on

this issue, the Commission understandably

adopted a solution that was capable of generating

consensus. However, the recom-

mendation does not mean that power plant oper-

ators can demand arbitrarily high levels of com-

pensation. On the one hand, the gradual phase-

out schedule provides the federal government

with significant room for maneuver, including an

ability to conduct negotiations with multiple op-

erators over most of the phase-out timeframe.

53 (Becker/Büttner/Held, 2017), (Schomerus, 2018) 54 (Redeker/Sellner/Dahs, 2018)


49

The Commission has also set the operators and

the federal government an initial negotiation

deadline of 30 June 2020. If an amicable solution

is not reached by this date, legislators are to adopt

a decommissioning timetable (including compen-

sation appropriate from the legislator's point of

view). On the other hand, the competitive bidding

procedure, which is to govern the decommis-

sioning of hard coal capacities from 2023 on-

ward, will assure that compensation payments

are determined in an efficient manner.

Risks to security of supply: In addition to the

above points, critics argue that the Commission

has not done enough to ensure security of sup-

ply.55

However, the final report does contain numerous

measures that aim to safeguard security of sup-

ply. First, operators who slate plants for shut-

down must demonstrate they can fulfil their sup-

ply obligations in another manner. Second, the

Commission has recommended that the Com-

bined Heat and Power Act be reformed by 2030

to ensure sufficient time and incentive for the

replacement of coal-fired power stations with

co-generation facilities. Third, with regard to the

regulatory design of energy markets and the ex-

pansion of capacity, the Commission has pro-

posed (a) the further development of the existing

system for monitoring security of supply; (b) an

improved permitting process for natural-gas-

fired power plants; and (c) the reform of the ex-

isting design of the energy market, should this

prove necessary over the mid-term. Finally, all

power plant closures are subject to approval by

the Federal Network Agency. 56

Threat to industrial competitiveness: Another

point of criticism is that the proposed recom-

mendations could lead to a significant jump in

55 (Frankfurter Allgemeine Zeitung, 2019a) 56 (Kommission "Wachstum, Strukturwandel und Beschäftigung", 2019) 57 (Frankfurter Allgemeine Zeitung, 2019a)

electricity prices for end consumers. It is argued

that this could jeopardise the competitiveness of

energy-intensive industrial firms and other

commercial customers.57

However, the analysis conducted for this paper

does not lend credence to this fear. The expansion

of renewable energy in combination with the

phase-out of coal-fired power generation will

tend to produce lower wholesale electricity

prices. This will benefit rather than harm en-

ergy-intensive industrial consumers. Further-

more, only a slight increase in the electricity

price can be anticipated for other consumers, as

the Commission has proposed a countervailing

reduction in grid fees (see Section 5).

Significant burden to the federal budget: The

last point of criticism relates to the high level of

additional government spending that would be

required. In the view of the critics, these costs

are excessive, particularly considering the scope

of carbon reduction achieved. 58

To be sure, the Commission's recommendations

entail a considerable financial burden (see Sec-

tion 6), and total costs are difficult to estimate at

this stage. Most of the costs incurred, however,

stem from spending to cushion the negative im-

pact on those directly affected by the phase-out,

including investment to ensure future economic

prosperity in coal-mining regions. In this regard,

the Commission is concerned with assuring that

the transition away from coal occurs in a socially

equitable manner. On this point, it must also be

noted that market-based solutions do not enjoy

majority support in the German parliament or

among impacted stakeholders. A final issue bears

mentioning in this regard: if the German govern-

ment had worked to tackle this issue at an earlier

date, we could expect lower overall costs to the

federal budget.

58 (Frankfurter Allgemeine Zeitung, 2019a), (Frankfurter Allgemeine

Zeitung, 2019b), (Tagesspiegel Background Klima & Energie, 2019)


50

9 Conclusion

The Commission's recommendations represent

an important milestone in the German energy

debate.

In recent years, the phasing out of coal-fired gener-

ation in Germany has been a subject of intense con-

troversy. The recommendations drawn up by the

Commission represent a pragmatic compromise be-

tween industrial manufacturers, energy providers,

trade unions, and environmental associations. The

ability to solve pressing political dilemmas with ne-

gotiated solutions that bring all stakeholders to the

table, as it comes in the heels of recent agreements to

end of coal subsidies and phase out nuclear power.

The federal government would be advised to imple-

ment the recommendations in a faithful manner,

given the nearly unanimous approval the compro-

mise enjoys. In this way, the compromise almost

definitely marks the end the political debate con-

cerning whether Germany will phase out coal power.

The emissions target for the energy sector will

most likely be achieved by 2030 if the Commis-

Without implementation of the measures recom-

mended by the Commission, coal power and associ-

ated emissions would only decline slowly in coming

years. The proposed measures will enable Germany

to meet its 2030 emissions target for the energy sec-

tor and avoid some one billion tonnes of CO2 emis-

sions by 2038. Since the phase-out of coal-fired

power generation is to be replaced primarily by do-

mestic renewable energy and the CO2 certificates

that are freed up will be cancelled, the displacement

of CO2 emissions abroad can be almost completely

avoided.

The phase out of coal power enhances the cred-

ibility of the German energy transition.

The credibility of Germany's energy transition has

suffered in recent years due to slow progress in re-

ducing greenhouse gas emissions. Criticism has fo-

to meet its emissions targets for 2020 and its persis-

tently high levels of coal-fired power generation. If

the Commission s recommendations are imple-

mented, this will enhance the credibility of Ger-

many

While the Coal Commission targets 2038 as the

year in which the phase out will be complete,

the exit from coal could occur faster.

On the one hand, 2035 is named in the compromise

as a possible earlier exit year. On the other hand, pe-

riodic progress reviews in 2023, 2026, 2029, and

2032 will offer policymakers an opportunity to react

to a worsening climate crisis with additional

measures.

mise will allow for a socially equitable acceleration of

the phase-out timetable.

The measures recommended by the Commission

will offer new growth opportunities for the en-

ergy sector and energy-intensive industrial com-

panies.

The gradual reduction of coal-fired power genera-

tion in combination with the expansion of renewable

energy to a 65 per cent share of generation by 2030

means that wholesale electricity prices will be sig-

nificantly lower than anticipated on the basis of ex-

isting energy and climate policy decisions. Energy-

intensive industrial firms will benefit in particular

from lower electricity prices. Furthermore, non-

privileged commercial consumers will not be unduly

burdened by the proposed measures, particularly

considering the foreseen provisions for lowering

grid fees. Last but not least, the energy sector will be

in a position to take advantage of new investment


51

and growth opportunities thanks to the further ex-

pansion of renewable energy, the modernisation of

the electricity grid, the replacement of coal with nat-

ural-gas-fired generation, the further development

of CHP subsidies, and incentives for energy storage

facilities.

The Commission's recommendations offer coal

regions and workers clear opportunities for the

future.

The scale and long-term nature of the recommended

structural aid for the coal regions concerned and re-

lated investment in energy, infrastructure, and re-

search should enable the regions to enjoy sustainable

economic development. Extending the phase-out of

coal to 2038 at the latest will also enable the coal re-

gions to tap new opportunities for wealth creation

and employment. Furthermore, a comprehensive

package of labour policy measures will ensure that

no employee in the coal industry is left high and dry.

Various recommendations are designed to en-

sure security of supply.

Federal Network Agency will have veto power on

decommissioning in case doubts arise as to contin-

ued security of supply; decommissioning will be

performed on a consensual basis with operators; the

Combined Heat and Power Act will remain in effect;

security of supply will be monitored on an ongoing

basis; and existing reserve instruments will remain

in place. However, the model calculations indicate

that one new gigawatt of natural-gas-fired genera-

tion will be needed by 2030. Accordingly, the federal

government will have to closely monitor whether

market incentives are sufficient for ensuring this

expansion, or whether regulatory intervention will

be required in coming years.


52

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4

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Erneuerbare vs. fossile Stromsysteme: ein KostenvergleichStromwelten 2050 – Analyse von Erneuerbaren, kohle- und gasbasierten Elektrizitätssystemen

FAQ EEG – Energiewende: Was bedeuten die neuen Gesetze?Zehn Fragen und Antworten zu EEG 2017, Strommarkt- und Digitalisierungsgesetz

Eigenversorgung aus Solaranlagen Das Potenzial für Photovoltaik-Speicher-Systeme in Ein- und Zweifamilienhäusern, Landwirtschaft sowie im Lebensmittelhandel

All publications are available on our website: www.agora-energiewende.de

Agora Energiewende is a joint initiative of the Mercator Foundation and the European Climate Foundation. The cooperation of Agora Energiewende and Aurora Energy Reasearch is kindly supported by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) on behalf of the German government..

158/03-A-2019/EN

Agora Energiewende

Anna-Louisa-Karsch-Straße 2 | 10178 Berlin | Germany

P +49 (0)30 700 14 35-000

F +49 (0)30 700 14 35-129

www.agora-energiewende.de

[email protected]

Agora Energiewende develops evidence-based and politically viable strategies for ensuring the success of the clean energy transition in Germany, Europe and the rest of the world. As a think tank and policy laboratory we aim to share knowledge with stakeholders in the worlds of politics, business and academia while enabling a productive exchange of ideas. Our scientifically rigorous research highlights prac-tical policy solutions while eschewing an ide-ological agenda. As a non-profit foundation primarily financed through philanthropic dona-tions, we are not beholden to narrow corporate or political interests, but rather to our commit-ment to confronting climate change.

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